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Pacific

Ranch Bakery
Erin Miller Professor Merlino ABM 490 5 June 2013

PACIFIC RANCH BAKERY FEASIBILITY STUDY

PACIFIC RANCH BAKERY


TABLE OF CONTENTS

DESCRIPTION OF PRODUCTS AND SERVICES .............................................................................................................. 3 TECHNOLOGY CONSIDERATIONS AND EQUIPMENT ................................................................................................ 4 PRODUCT/SERVICE MARKETPLACE ................................................................................................................................ 5 PROMOTIONAL ACTIVITIES ................................................................................................................................................. 8 ORGANIZATION AND STAFFING ...................................................................................................................................... 11 SAMPLE PRODUCT ................................................................................................................................................................. 14 SCHEDULE .................................................................................................................................................................................. 15 EXECUTIVE SUMMARY ......................................................................................................................................................... 16 FINANCIAL PROJECTIONS .................................................................................................................................................. 17 CONCLUSION ............................................................................................................................................................................ 22 WORKS CITED .......................................................................................................................................................................... 23

PACIFIC RANCH BAKERY


DESCRIPTION OF PRODUCTS AND SERVICES


Pacific Ranch Bed & Breakfast, located in Arch Cape, Oregon, boasts an on-site

bakery, which is open from 8am-6pm. The menu includes several types of seasonal pies, puddings, cakes, breads, quiche, and even ciders. All products are seasonal and made from organic crops grown on the ranch, therefore, they will only be offered when their ingredients are at their freshest. The bakery is open from June-December in order to allow the produce to be in its best shape, before being baked into a treat for our customers. Its worth the wait; with ingredients this fresh, you can really tell the difference! In our summer months (June-August), Pacific Ranch harvests fresh apricots,

cherries, figs, cherries, strawberries, boysenberries, blueberries, and raspberries. In the fall (September-December), we harvest fresh apples, pears, pumpkins, persimmons, kiwi, zucchini, sage, and plums. We also grow fresh carrots, tomatoes, basil, rosemary, artichokes, and arugula in both seasons. These are the primary ingredients of our many fresh baked goods!

Menu:
Summer: Pies- Apricot, Strawberry, Cherry, Boysenberry/Raspberry, Blueberry Bread- Basil Tomato, Rosemary Olive Oil Turnovers- Raspberry, Blueberry, Boysenberry, Apricot, Cherry Artichoke Arugula Quiche Fig Pudding Carrot Cake Fall: Pies- Apple, Pear, Pumpkin Bread- Kiwi, Zucchini, Pumpkin Sage, Basil Tomato, Rosemary Olive Oil Cider- Apple, Spiced Pumpkin, Cinnamon Plum, Pear Artichoke Arugula Quiche Persimmon Pudding Carrot Cake

PACIFIC RANCH BAKERY


TECHNOLOGY CONSIDERATIONS AND EQUIPMENT:


The following equipment is essential to the bakery, and will be used daily by our baking staff: Convection Oven: cooks food thoroughly, evenly, and efficiently Bakers Pride BCO-E2 Full Size Electric Convection Oven ($5400) Proof Box: To set bread in so it rises correctly Metro (Intermetro) Industries C5 Cabinet, Proofing-Holding, Non-Insulated, 18 Pan Slides ($1459) Mixer: 30 quart mixer for dough Hobart 30 QT Quart Mixer Model D300 ($2500 used) Bakery Racks: for storage of baked goods Win-Holt 32-Pan Front Load Enclosed Pan Rack-Extra Heavy Duty ($873) Dough Sheeter: To roll and slice dough into thin pieces for pies and turnovers Somerset Industries Dough Sheeter, Compact, With Synthetic Rollers ($1969) Food Processor: for chopping produce to be baked Waring 2.5 qt Continuous Feed Commercial Food Processor ($799) Commercial Refrigerator: for storage of perishables Hoshizaki CR2B-FS Commercial Series Refrigerator ($2973) Cake pans, bread pans, storage pans, cooking pots and pans, cookie sheets, Stainless steel utensils, bowls (Budget: $1500) Total cost of start up equipment and supplies: $17,473

PACIFIC RANCH BAKERY


PRODUCT/SERVICE MARKETPLACE
The market for baked goods worldwide is growing and expected to hit over $300 billion by 2015. A niche within this market, organic and locally grown baked goods are gaining more and more popularity in North America. Pacific Ranch bakery focuses on these two selling points. The bakery offers a more nutritious, flavorful product that consumers will always feel safe eating. We currently sell our bread, and pastries only at the bakery and in local farmers markets, but an opportunity for us would be to sell the product in local grocery stores. A weakness that in doing this we would need to address is the perishability of our product since we do not use preservatives. Also, if it were in a grocery store, we would need to grow more crops to supply more produce and we would need to hire more people to bake the goods (Report Linker, 2013). We have, however, begun to expand the market for our homemade cider, and will use this product to gain brand awareness in the mean time. Our promotional plan for the cider includes samples at the bakery and coupons in the local paper for a free gallon when another is purchased. Pacific Ranch Bread & Breakfast also sends our guests home with a gallon of cider to share with their friends and family. We hope in doing this, our name will spread by word of mouth. Although the bed & breakfasts customers are beneficial to the bakerys profitability, our target market lies in the local city of Arch Cape, Oregon. We target the local market because unlike the guests, they will most likely be our returning customers to the bakery. Ninety- Four percent of people who live in Arch Cape are Caucasian, and 63% of residents are aged 40 or older. The majority of people living here have an Associates degree or above. The population is about 49% female and 51% male, and 73% of people are married. The highest areas of

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employment are in retail and health professions (both at 28%), and there is a 4% unemployment rate. Forty-two percent of people have a combined household income of less than $30,000, forty-seven percent make from $30,000-$75,000, and eleven percent of the population makes $75,000-$150,000. To benchmark this number, the median household income in Oregon is $49,850 (Population Demographics, 2013). Pacific Ranch Bakery uses these demographics to cater to the taste of our customers. Our prices lie at $6.00 for a loaf of bread, quiche, or pudding; $8.00 for a gallon of our homemade cider; and $10.00 for any flavor pie, cake, or a box of turnovers. Our baked goods are affordable and well worth it. Middle-aged women especially seem to enjoy our treats, and appreciate that they are healthy for them and their families. We aim to produce 124 baked items every day, which would generate revenues of $956 a day and $6,692 a week (Figure 1). Figure 1: Quantity of Baked Goods Produced by Category Bread Quiche Pudding Cider Cake Pie Turnovers Total
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Price $6.00 $6.00 $6.00 $8.00 $10.00 $10.00 $10.00

Quantity 21 15 20 30 8 10 20 124

Revenue/Day Revenue/Week $126.00 $90.00 $120.00 $240.00 $80.00 $100.00 $200.00 $956.00 $882.00 $630.00 $840.00 $1,680.00 $560.00 $700.00 $1,400.00 $6,692.00

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Figure 2: Required Staffing and Costs of Staffing Executive Chef Pastry Chef 1 Pastry Chef 2 Pastry Chef 3* Pastry Chef 4* Pastry Chef 5* Busser 1 Busser 2* Total In the busy seasons, Pacific Ranch Bakery projects that in order to produce this many goods, we will need to hire one Executive Chef, salaried at $55,000 a year, and five pastry chefs at $14.42 an hour. We will also hire two bussers who will be paid $9.00 hourly. Direct labor will cost us $4,589.60 a week. We estimate to spend $250 per week for supplies and ingredients that cannot be grown in our gardens (dairy, eggs, etc). Our profit, after direct labor and supplies is taken out, but before any additional costs are, is expected to be $2,102.40 a week. Yearly $55,000.00 $30,000.00 $30,000.00 $12,112.80 $12,112.80 $12,112.80 $18,720.00 $6,048.00 $176,106.40 Hourly $26.44 $14.42 $14.42 $14.42 $14.42 $14.42 $9.00 $9.00 Hours/Day 8 8 8 8 8 8 8 8 Pay/Day $211.52 $115.36 $115.36 $115.36 $115.36 $115.36 $72.00 72 $932.32 Pay/Week $1,057.60 $576.80 $576.80 $576.80 $576.80 $576.80 $360.00 $288.00 $4,589.60

*Seasonal Position (June-December)

PACIFIC RANCH BAKERY


PROMOTIONAL ACTIVITIES
The promotional activities of Pacific Ranch Bakery mostly include sampling at the bakery. The bakery will attend local farmers markets in Arch Cape, Oregon to sell goods, and there will be samples of the products at these as well. Upon checking into Pacific Ranch Bed & Breakfast, guests will find a free gallon of cider in their rooms, along with a take-out bakery menu. We hope that this will encourage guests to try other items at the bakery while they are visiting. The bakery also mails coupons to residents in Arch Cape, Oregon, and also provides them to be printed online. Our current coupon promotion is a free gallon of cider when another is purchased. The promotional products of our coupons change every month, to encourage people to come back and try something new. We also offer loyalty punch cards to our customers, and a free pie on their birthday! Of course, being located in a small city, we rely heavily on word of mouth. We hope the residents of Arch Cape, Oregon will return and tell their friends about the bakery! The baked goods at Pacific Ranch Bakery have a competitive advantage over our competition. First of all, all of the vegetables, fruit, and herbs used in baking are organic and grown on the ranch. This is a competitive advantage because people will know that our ingredients are safe and where it comes from. Because of this, our goods are seasonal, or only sold when the produce is in season. This ensures that the produce will be the freshest and of the highest quality when it is picked. A third advantage of our products is that it is baked carefully and locally. All baked goods are baked with our commercial baking equipment, right on the ranch. Produce is literally picked from the ground and carried directly to the bakery, where it is promptly baked into delicious pastries, or pressed into fresh cider. Residents of Arch Cape, Oregon will also be pleased to support local, sustainable farming. Other differences of the products sold at Pacific Ranch Bakery, is that, for now, they are not sold in local grocery stores. One can only buy Pacific Ranch baked goods at the bakery or at local farmers markets that we attend. Some future export opportunities may be to sell in local grocery stores, but it may be difficult since we do not use preservatives in

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our products. Another idea would be to let customers order products online and we could deliver within the city. The pricing we use is competitive and value-based pricing. Our prices are: $6.00 for a loaf of bread, quiche, or pudding; $8.00 for a gallon of our homemade cider; and $10.00 for any flavor pie, cake, or a box of turnovers. This is competitive with grocery store products, and a bargain compared to cake and pastry shops. Also, our natural products are made from organic produce, baked fresh that day, and include no processed ingredients or preservatives in them. Customers who value their health can find healthy food at a great price at Pacific Ranch Bakery.

Sample Promotional Media PACIFIC RANCH BAKERY

Pacific Ranch Bakery | Coupon


Redeemable at Pacific Ranch Bakery Expires: September 1, 2013

Receive one free gallon of cider when you buy one of equal value

Pacificranchbakery.com

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Pacific Ranch Bakery
Fall Menu

Seasonal Pies ($10) Delicious home-baked pies! Apple, Pear, or Pumpkin Bread Loaf ($6) We offer many flavors of fresh baked bread! Kiwi, Zucchini, Pumpkin Sage, Basil Tomato, Rosemary Olive Oil Artichoke Arugula Quiche ($6) A healthy snack or meal packed with vitamins! Persimmon Pudding ($6) A sweet pudding made of fresh persimmons Carrot Cake ($10) A delicious, moist treat for the whole family! Pacific Ranch Cider ($8) A gallon of our famous cider! Apple, Spiced Pumpkin, Cinnamon Plum, Pear

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ORGANIZATION AND STAFFING Hospitality Manager


Oversees all employees in the hospitality department, including front desk, housekeeping, custodial, and baking staff. Responsible for scheduling and maintaining an updated personnel action file on each employee in the hospitality department Responsible for helping the owner in hiring, training, and employee reviews for hospitality staff Approaches and meets with the Executive Chef to review changes to the bakery menu and assist in ordering ingredients Responsible for advertising and promotion activities of the Bed & Breakfast Maintains the website of the Bed & Breakfast Responsible for promotion of Pacific Ranch Bakery, including scheduling attending farmers markets, mailing coupons, etc. Acts as a customer service representative to guests staying in the Bed & Breakfast Maintain a safe environment for guests staying in the Bed & Breakfast Work with the owner and Grounds Manager to resolve any internal or external conflicts

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Grounds Manager
Oversees all employees in the outdoor recreation department, including barn staff, sports instructors, and gardeners. Responsible for scheduling and maintaining an updated personnel action file on each employee in the outdoor recreation department Responsible for helping the owner in hiring, training, and employee reviews for outdoor recreation staff Approaches and meets with the Executive Chef to go over the forecast of produce the bakery will need, and relays information to gardening staff to ensure a correct amount of each crop is grown. Schedules trail rides, outdoor sports, and family activities on the grounds Schedules events at Pacific Ranch Bed & Breakfast Organizes events, ensures proper staffing for events, and orders decorations and catering, if required Maintain a safe environment for guests enjoying any of the outdoor recreation activities Work with the owner and Grounds Manager to resolve any internal or external conflicts
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Owner (Existing Capabilities)


The owner will have the ultimate say in all hiring and business decisions, but will

make these decisions with input of both managers. The owner acts as the general manager, bridging both the hospitality and outdoor recreation staff. The owner is responsible for book keeping of the company and payroll for employees. The owner is also the person who interviews potential employees and develops training programs for newly hired employees. The owner will assist both managers in creating advertising and promotion programs for the Bed & Breakfast, Bakery, and event venue. Other skills the owner brings to the business are organization and a motivating attitude. The owner is determined to influence determination in employees and spark creativity, which is why she is very involved in training and development of employees. She also highly values and exemplifies excellent customer service and courtesy, to both the guest and employees.

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SAMPLE PRODUCT

The following recipe is for Pacific Ranch Bakerys delicious Zucchini bread, offered

on the fall menu. This recipe yields seven loafs, and is baked fresh daily! It is delicious, uses whole, natural ingredients, and is healthy (Wife, 2013).

Ingredients: 10 cups whole wheat pastry flour 3 tsp. salt 3 tsp. baking powder 3 tsp. baking soda 10 tsp. cinnamon 3 cups sugar 10 eggs 1 cups applesauce 1 cups coconut oil 3 tbs. vanilla 7 cups zucchini (about 5 large zucchinis) 1. In 30 qt. Mixer, combine flour with the salt, baking powder, baking soda, and cinnamon. 2. In a handheld mixer, beat the eggs with the sugar, applesauce, coconut oil, and vanilla. 3. Grate zucchini in the 2.5 qt. food processor 4. Combine the wet ingredients into the 30qt mixer of dry ingredients, and then fold in the zucchini. 5. Divide the batter between seven loaf pans and bake in the commercial convection oven at 350 F for 45 minutes. 6. Remove the bread from the oven and let it cool for about 10 minutes. Then, remove the loaves from the pan and finish cooling on a bakery rack. 7. Retrieve fresh bread from bakery racks and deliver to customers plates as they order!

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SCHEDULE
Since it is a brand new company, Pacific Ranch Bakery expects to implement the plans set out in this book over the period of six months. The six-month schedule of events for Pacific Ranch Bakery includes: April 15, 2013: Move into property, purchase equipment, and set up May 15, 2013: Implement employee training program June 15, 2013: Bakery Grand Opening (Summer Menu) July 15, 2013: Begin attending local Farmers Markets August 15, 2013: Create Fall Menu September 15, 2013: Fall Menu Begins

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EXECUTIVE SUMMARY
I would definitely recommend going forward with this business. The pastry business continues to grow in the United States, and demand for healthy and nutritious snacks is also climbing. By word-of-mouth and advertising and promotions such as coupons, sampling, and farmers markets, news of Pacific Ranch Bakery will spread and the business will grow. The location of the Bakery is a bonus, both because it is in a medium-high income town that celebrates culture, and because it is part of a Bed & Breakfast that attracts travelers. Both Arch Cape residents and tourists will love the tasty pastries offered at Pacific Ranch Bakery.

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FINANCIAL PROJECTIONS
This section deals with various business costs and revenues that Pacific Ranch Bed & Breakfast expects to deal with within the next three years. Please note that these financial projections are based on three assumptions. (1) The business revenues will increase by 10% of the first years revenues in the second year, and 15% of the second years revenues in the third year. (2) There will be no employee turnover within the first three years of opening. (3) The bakery will be selling specialty goods from June to December (31 weeks) each year. (4) Some bakery staff will be working year round cooking for the Bed & Breakfast.

Overhead Costs
Based on these assumptions, overhead for direct labor will include the salaries of an Executive Chef, five pastry chefs, and two bussers from June to December. From January to May, there will be three less pastry chefs and one less busser, because the bakery will not be as busy. The total cost of direct labor per year of Pacific Ranch Bakery will be $176,106.40. This cost is fixed, as employees pay will not change during the first three years. The cost of direct labor is broken down by employee in Figure 3. Figure 3. Cost of Direct Labor Title Status Pay per year $55,000.00 $30,000.00 $30,000.00 $12,112.80 $12,112.80 $12,112.80 $18,720.00 $6,048.00 $176,106.40 Executive Chef Full-time Pastry Chef 1 Full-time Pastry Chef 2 Full-time Pastry Chef 3 Seasonal Pastry Chef 4 Seasonal Pastry Chef 5 Seasonal Busser 1 Full-Time Busser 2 Seasonal Total Cost of Direct Labor

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Another fixed overhead cost of Pacific Ranch Bakery is the cost of the building.

Pacific Ranch Bed & Breakfast, which houses the bakery, is 5,500 square feet. Pacific Ranch Bakery takes up 1,100 square feet, which is 20% of the Bed & Breakfasts area. For this reason, Pacific Ranch Bakery will pay for 20% of the Bed & Breakfasts lease. The Bed & Breakfast lease is $6,000 a month, giving the Bakery a $1,200 lease per month. This makes the total lease cost of the bakery $14,400 a year. There are a few miscellaneous costs that the bakery will be paying each month, one of which is utilities, estimated to be $300 a month, or $3,600 per year. Another is insurance, which will cost around $100 a month, or $1,200 per year. We will also advertise every month from June to December. Advertising will cost around $3,500 a year in the form of flyers, coupons, newsletters, farmers markets, and sampling. Finally, the kitchen is expected to need $1,000 inventory each month from June-December, and $500 a month from January-May. This is a total inventory cost of $9,500 a year. These extra costs are projected to be around $17,800 per year.

Additional Start-up Costs


There are many more costs required in the start up of a new business. First, a security deposit will be required for the building, estimated at one months rent, or $1,200. The bakery was previously used as a restaurant, so there will be no leasehold improvements to the building, but we have budgeted $1000 in maintenance per year. Our start-up equipment and supplies will cost around $17,473. We will budget employee training at $750 per employee, which will add up to $6,000 during the first year. Finally, we will pay an estimated $1,000 in permit fees (Startup: Costs for Bake Shop, 2012). This brings the Bakery to a total of $26,673 additional start-up costs during the first year of business. Figure 4 is the projected cash flow of the first twelve months of operation.

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Revenues
The owner has decided to start the business with $5,000, in the month of May 2013. In the first month reported on the Cash Flow Statement, there are not any revenues because the Bakery will be opening in June to the public. The month of May will be solely for setting up the bakery, purchasing equipment, buying ingredients, and training employees. For this reason, Pacific Ranch Bakery will occur debt of around $30,916 at the end of the month. This debt will decrease each month starting when the Bakery opens in June. Pacific Ranch Bakery should break-even with costs and revenue in the month of October. By the end of October, the bakery will become profitable, with a $164 profit. This profit will be reinvested into the business, and by the end of the fiscal year in April 2014, the business will have made a $20,089 profit (The B&B Industry, 2013). Pacific Ranch Bakery expects the business profit to grow by 10% during its first year of opening, as can be seen in Figure 4. The Bakery expects to generate $26,768 its first month of opening, then increase revenues by $1,340 by the end of December. From January to April, revenues are expected to be around half the amount, because the Bakery will only be serving simple items to the Bed & Breakfast guests, and not baking specialty items because they are not in season. Figure 5 explains the amount of each baked good Pacific Ranch Bakery expects to sell during the first month of opening. Figure 5. Expected Bakery Production and Sales for June-13
Bread Quiche Pudding Cider Cake Pie Turnovers Total Price $6.00 $6.00 $6.00 $8.00 $10.00 $10.00 $10.00 Quantity 588 420 560 840 224 280 560 3,472 Revenues $3,528 $2,520 $3,360 $6,720 $2,240 $2,800 $5,600 $26,768

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The Bakery will need to sell 3,472 items during June to reach the desired $26,768 of revenues. Again, this number is expected to grow gradually, increasing by 10% within the first year. A 15% increase in revenues is desired during the second year. Low employee turnover will help Pacific Ranch Bakery keep its expenses low and help profits continue to grow. When produce that the Bakery needs is not in season from January to May, the Bakery is only expected to make half the amount of revenues. For this reason, it is important that the Bakery reaches or goes beyond the quotas set out in Figure 5. If Pacific Ranch Bakery is successful with this plan, by the end of the third year, it will have generated $90,000 net profit (Figure 6). Pacific Ranch Bakery Three year Income Statement for the years 2013-2015 Revenues: Bakery Sales Total Revenues: Expenses: Inventory Employee Wages Equipment purchases Repairs & maintenance Advertising Rent Utilities Insurance Employee Training Security Deposit Permit Fees Total Expenses: Net Profit=

2013 $250,069 $250,069 $9,500.00 $176,106.36 $17,473.00 $1,000.00 $3,500.00 $14,400.00 $3,600.00 $1,200.00 $6,000.00 $1,200.00 $1,000.00 $234,979.36 $15,089

2014 $275,075 $275,075 $10,450 $176,106 $0 $1,100 $3,850 $14,400.00 $3,600.00 $1,200.00 $0 $0 $0 $210,706 $64,369

2015 $302,583 $302,583 $11,495 $176,106 $0 $1,500 $4,235 $14,400.00 $3,600.00 $1,200.00 0 0 0 $212,536 $90,047

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CONCLUSION
Thank you for considering investing in Pacific Ranch Bakery. As you can see, this business has potential and a lot of room to expand. Dont miss out on the once in a lifetime opportunity to invest in a company that brings healthy, local, and affordable treats to the bakery industry. Thank you for your time!

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WORKS CITED
Population Demographics. (2013). (Movoto LLC) Retrieved April 2013, from Movoto: http://www. movoto.com/neighborhood/or/arch- cape/97102.htm#PopulationSectionhttp://quickfacts. census.gov/qfd/states/41000.ht

Report Linker. (2013). Bakery and Pastry Industry, Market Research. Retrieved April 2013, from Report Linker: http://www.reportlinker.com/ci02034/Bakery-and- Pastry.html Startup: Costs for Bake Shop. (2012, March 31). Retrieved May 29, 2013, from One Fat Frog Restaurant Equipment: http://restaurantequipmenttogo.com/tag/bakery- overhead-costs/ The B&B Industry. (2013). Retrieved May 29, 2013, from Professional Association of Innkeepers, International: http://www.innkeeping.org/?The_Industry Wife, A. O. (2013). Zuchinni Bread. Retrieved May 2013, from An Organic Wife: http://www. anorganicwife.com/2012/09/recipe-zucchini-bread.html

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